Getting Your Priorities Straight: Divorce And Bankruptcy
Sometimes, trouble just seems to come in pairs. If you and your spouse have encountered some very troubled waters and are considering taking more than one major legal move in the near future, you may be wondering if there are benefits or risks with what to do first. You should know that the order could make a huge difference, depending on your exact circumstances, so read on to find out more about these complex issues that surround a bankruptcy and divorce filing.
Burdened with debt?
You might be able to make a great deal of your debt disappear quite quickly, which could eliminate one of the most contentious issues a divorcing couple can face. A chapter 7 bankruptcy filing before you divorce will make your credit card debt, and other unsecured debt, go away. This could help clear away some of the financial issues before you begin your divorce proceedings, and perhaps make your divorce a bit quicker and less acrimonious.
Be cautious about secured property loss.
If you have some secured property that has the potential to be seized by the bankruptcy courts, tread more carefully. Secured property, such as a home secured by a mortgage, can be taken by the bankruptcy trustee and sold to help pay some of your debts. Be sure to discuss your potential divorce with both a bankruptcy attorney and a divorce attorney, since filers are not allowed to "shed" property prior to a chapter 7 filing. This applies to homes, vehicles and anything else that was used as collateral on a loan.
Double your allowances
All states have homestead and other property exemptions available for filers, which removes some of the value from their property and consequently leaves it less attractive to the bankruptcy trustee. Some states allow filers to double those exemptions for an even greater benefit, so it would be smart to stay married long enough to get through the bankruptcy together in those instances.
The means test.
Every state has a median income level, and if your income is above that level you may be prevented from filing a chapter 7 bankruptcy. Married people are evaluated using both incomes. If your income is too high as a couple, it could make more sense to divorce first and file bankruptcy individually later on. There are some other factors at work here, such as using certain high expenses to lower your income and something called the marital adjustment deduction, so be sure to discuss your particular situation with your bankruptcy attorney, someone like Geranios Law PLLC, for more clarity.